What does accounting focus on? Ans- The impact a business's activities have on its overall financial
performance
Which report summarizes cash collections and cash expenditures from operating, investing, and
financin
...
What does accounting focus on? Ans- The impact a business's activities have on its overall financial
performance
Which report summarizes cash collections and cash expenditures from operating, investing, and
financing activities over a period of time? Ans- Statement of cash flows
Which users would have a primary concern with an organization's ability to provide healthcare benefits?
Ans- Employees
Which body regulates a certified public accounting firm's audit practices when the firm is auditing a
large publicly traded company? Ans- The Public Company Accounting Oversight Board (PCAOB)
What has had the most significant impact on accounting practices? Ans- Information technology
What two items of information are revealed on the balance sheet?
Choose 2 answers Ans- Ownership.
Debt
Which term is defined as the residual interest in the net assets of a company? Ans- Owners' equity
A corporation has total liabilities of $300 million, total owners' equity of $100 million, and current assets
of $50 million.
What is the value of the firm's long-term assets? Ans- $350 million
Which situation should result in revenue recognition on the income statement for the year ending
12/31/14 if the firm is using accrual-basis accounting? Ans- In 2014, a company provides services to a
customer for which cash will be collected the next year (2015).
Which category on the statement of cash flows summarizes cash receipts and payments to owners and
creditors of the company? Ans- Cash flows from financing activities
Where would an investor find a summary of a company's significant accounting policies? Ans- In the
notes to financial statements
Which assurance does an external audit report provide for its readers? Ans- The company's financial
statements fairly reflect its financial position
Reliable Ans- Information that can be verified
Relevant Ans- Information having to do with the matter at hand
Material Ans- Information that is important enough to make a difference
Conservatism Ans- Information related to recognizing losses as they occur
steps in the decision cycle Ans- 1 Prepare financial statements.
2 Analyze financial statements.
3 Gather information.
4 Make decision.
5 Implement decision
Partial financial information for a company is as follows:
Current assets $36,543
Total assets $58,719
Current liabilities $24,824
Total liabilities $48,561
Stockholders' equity $10,158
Sales $46,997
Net Income $ 3,761
Market value of shares $41,316
What is the price-earnings (PE) ratio for this company? Ans- 11.0
What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the
same? Ans- Continual decrease in sales
Which two cash flow adequacy ratios represent a cash cow? Ans- $6,991/$5,486. $5,220/$1,875.
Which formula yields a cash times interest earned ratio of 11? Ans- Cash before interest and taxes of
$11,000 / cash paid for interest of $1,000
Which form of debt should be reported in the long-term liability category? Ans- Notes payable expected
to be paid in 18 months
In January of year 1, a company began doing business as a corporation in order to sell technologyrelated accessories and services. During its first month of operations, the following events occurred:
January 1
The corporation received $1,000,000 in cash in exchange for stock issued to stockholders.
January 3
The corporation borrowed $250,000 from bank. The loan is a four-year loan with an interest rate of 12
percent, payable each year on January 1 beginning in year 2.
January 5
The corporation purchased equipment to be used in the business for $200,000 cash.
January 8
The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was
put on credit accounts with suppliers.
January 15
The corporation hired five employees. Each employee will be paid $1,000 at the end of each month.
January 30
The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on
February 1, year 1.
What will be the impact of the January 5 event on the company's balance sheet on that date? AnsEquipment will increase $200,000, and cash will decrease $200,000.
In January of year 1, a company began doing business as a corporation in order to sell technologyrelated accessories and services. During its first month of operations, the following events occurred:
January 1
The corporation received $1,000,000 in cash in exchange for stock issued to stockholders.
January 3
The corporation borrowed $250,000 from a bank. The loan is a four-year loan with an interest rate of 12
percent, payable each year on January 1 beginning in year 2.
January 5
The corporation purchased equipment to be used in the business for $200,000 cash.
January 8
The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was
put on credit accounts with suppliers.
January 15
The corporation hired five employees. Each employee will be paid $1,000 at the end of each month.
January 31
The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on
February 1, year 1.
What will be the impact of the January 31 event on the company's balance sheet on that date? AnsPrepaid insurance will increase $6,000, and cash will decrease $6,000.
Which two values affect the measurement of net income?
Choose 2 answers Ans- Ordinary gains and losses . Operating expenses
Which two items' subtotals are included in a multi-step income statement?
Choose 2 answers Ans- Gross profit. Income from operations
A furniture company using accrual accounting purchased 20 sofas in November 2011. In December
2011, 8 of the 20 sofas were sold to customers. The customers all signed contracts agreeing to pay half
the amount owed in February 2012 and the remaining half in March 2012. At the time of sale, the
company was reasonably sure the customers would pay the amount owed.
The furniture company pays its salespeople a commission on each sofa sold, with commissions for
December 2011 sales paid in January 2012.
The furniture company paid $3,000 for advertising that ran in the local newspaper in November 2011.
In which month should advertising costs be expensed? Ans- November 2011
On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects
the equipment to have a useful life of five years. At the time of purchase, the company also purchased a
one-year insurance policy on this equipment, which cost $6,000.
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